Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you own one call option and one put option on shel

You own one call option and one put option on Shell, both with a strike price...

90.2K

Verified Solution

Question

Finance

You own one call option and one put option on Shell, both with astrike price of 80. The interest rate is 5% and the time toexpiration is nine months. The standard deviation of Shell is 25percent. Graph on the same graph the value of the call and the putas the price of Shell goes from 70 to 130. (So that is two lines onthe same graph.) Note:at least 50 data points on the graphs

Answer & Explanation Solved by verified expert
4.5 Ratings (785 Votes)
We use BlackScholes Model to calculate the value of the calland put optionsAs an example we calculate the value of the call and put optionwhen the price of Shell is 70The value of a call and put option areC S0 Nd1 Kert Nd2P K ertNd2 S0Nd1where S0 current spot priceK strike priceNx is the cumulative normal distribution functionr riskfree interest ratet is the time to maturity in yearsd1    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

You own one call option and one put option on Shell, both with astrike price of 80. The interest rate is 5% and the time toexpiration is nine months. The standard deviation of Shell is 25percent. Graph on the same graph the value of the call and the putas the price of Shell goes from 70 to 130. (So that is two lines onthe same graph.) Note:at least 50 data points on the graphs

Other questions asked by students

Q

Calculate the directional derivative of f(x,y,z)=x(y^2)+y((1-z)^(1/2)) at the point P(1,−2,0) in the direction of the vector v...

Basic Math
Q

A bakery would like you to recommend how many loaves of its famous marble rye bread...

Basic Math
Q

1 At the beginning of an experiment a scientist has 600 grams of radioactive Guyradium...

Basic Math
Q

Evaluate the function f x x 6x for the given value of x Simplify your...

Basic Math
Q

Nathan has 102 solid-colored.disks that are red,blue, and green. He lines them up on the...

Basic Math
Q

You want to put a 5 inch thick layer of topsoil for a new 33...

Basic Math
Q

At low altitudes the altitude of a parachutist and time in the air are linearly...

Calculus
Q

Question 1 The function y x sin x is a solution of the differential equation...

Calculus
Q

3 Finding for a given e using a graph Let f x x 3 and...

Calculus
Q

Not yet answered Marked out of 10.00 Flag questionSolve the equation [6]17 X+ [10117= [13]17...

Algebra
Q

8 Mark is 24 years old which is 75 as old as his friend Troy...

Algebra
Q

What is one reason that a Balanced Scorecard might be considered balanced? Multiple...

Accounting